CDL Hospitality Trust's NPI dropped 56% to $29.72m in H1

Most of its hotels were either temporarily closed or were operating at low occupancies.

CDL Hospitality Trusts (CDLHT) saw its net property income (NPI) plunge 56% YoY to $29.72m in H1 from $67.53m in H1 2019, an SGX filing revealed. Revenue similarly dropped 44.5% YoY to $52.06m from $93.77m over the same period.

With the exception of the New Zealand and Singapore hotels, most of CDLHT’s properties were either closed on a temporary basis or were operating at low occupancies from March onwards.

Whilst international demand was absent, occupancies for the New Zealand and Singapore hotels were bolstered by demand for accommodation facilities which were used for isolation purposes. Additionally, occupancy for the Singapore Hotels was also supported by demand from foreign workers affected by the border closures.

The substantive contributions to the portfolio rental income from the Singapore, New Zealand and Australia hotels, which amounted to $32.1m (inclusive of $22.7m fixed rent), partially insulated CDLHT from the severe effects of the pandemic.

Interest expense for H1 was lower by $1.1m YoY mainly due to lower funding costs on floating
rate loans. Overall, with the decline in NPI and absence of partial distribution of proceeds from the sale of Mercure and Ibis Brisbane hotels (sold in 2018), CDLHT recorded total distribution to Stapled Securityholders (after retention for working capital) of $18.4m and distribution per share DPS of 1.51 cents for H1, lower by 63.6% and 63.7% YoY respectively.

For CDLHT’s Singapore hotels, revenue per available room (RevPAR) was at $78 in H1, a 49.2% YoY drop from $154. The average occupancy rate of these properties also fell 17.6 percentage points (ppt) YoY to 68.2%, whilst the average daily rate slipped 36.1% to $115.

In New Zealand, the impact of the sharp downturn in the overall hospitality market was partially mitigated in the near term by Grand Millennium Auckland securing a managed isolation business from the government during the second quarter. New Zealand’s lockdown has been eased since early June where MICE activities can resume without a limit on the number of attendees and domestic travel is allowed with no social distancing requirements. 

Meanwhile, the lease structure of CDLHT’s hotels in Perth and Brisbane is largely a fixed rent structure, thereby insulating CDLHT from the severe downturn in trading conditions.

The fall-off in Japan’s tourism arrivals and nationwide state of emergency in place from mid-April to end May, during which the traditional annual Golden Week holidays occur, took a toll on the Japan hotels’ performance..

Similar to most resorts in the Maldives, Raffles Maldives Meradhoo closed temporarily from 1 April and its gestation was disrupted by the pandemic, whilst Angsana Velavaru operated at a low occupancy. Both resorts are managed with highly reduced staffing levels to contain costs.

The Maldives’ borders reopened in mid-July with a number of international airlines expected to resume operations over the next few months and Raffles Maldives Meradhoo is likely to reopen in Q4. Taking advantage of this low period, the refurbishment of all 79 land villas at Angsana Velavaru was completed in July while the construction of a new Presidential Villa at Raffles Maldives Meradhoo will complete later this year.

In addition, CDLHT’s UK Hotels were shuttered temporarily from 24 March in line with the
country’s lockdown measures. The closure of the hotels and the UK government’s furlough
scheme has helped CDLHT to contain operating costs and losses. Hilton Cambridge City Centre reopened in early July, whilst The Lowry Hotel is expected to reopen in August, depending on the level of demand.

In Europe, Pullman Hotel Munich operated at a low occupancy and Hotel Cerretani Firenze–MGallery in Italy was closed since 13 March. The said hotel is expected to reopen in mid-August.